FocusAsia SM may remain firm on strong crude futures, tight supply

23 February 2012 04:03[Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--Asian styrene monomer (SM) prices remain on an uptrend because of strong crude futures and supply constraints, but market players are starting to question how long the uptrend can be sustained, regional traders said on Thursday.

With WTI crude futures hovering at around $106/bbl, the gains in SM prices were extended and a deal was concluded at $1,475/tonne (€1,121/tonne) CFR (cost & freight) China on 22 February, ICIS data showed.

Spot SM prices rebounded off their lows at around $1,277/tonne CFR China seen in the second half of October 2011 and have been on an uptrend since, according to ICIS data.

“Strong crude prices have sustained SM prices in Asia and some traders are betting on even higher prices in the near term,” said a Korean trader.

Even the weak demand from the downstream styrenic resins sector during the traditional lull season in the fourth quarter of the year could not derail the SM price uptrend.

The production of resins in Asia usually tapers off in the fourth quarter as exports of finished products are largely completed by October each year.

“The demand for resins after the Lunar New Year in late January has only improved modestly, but SM prices have risen quite quickly,” said an SM end-user in Taiwan.

However, the consumption of resins is expected to pick up in March as moulders usually stock up on the material ahead of the start of their production season in April.

Other SM players said the monomer price increase was because of the region’s tightened supply, which was due to several plant turnarounds in China, Japan and Korea in February-April.

“Availability is generally tight because of the turnarounds and a lack of arbitrage cargoes from the US,” said a trader in Singapore.

The major producers that have scheduled a plant turnaround in the first half of the year include Asahi Kasei Chemicals and Idemitsu Kosan in Japan, Samsung Total Chemicals in Korea and Dohow Chemicals in China.

Asahi Kasei Chemicals will in March begin a 45-day turnaround at its 320,000 tonne/year No 2 SM unit and conduct a 20-day shutdown at its 390,000 tonne/year No 3 unit.

Idemitsu Kosan's 210,000 tonne/year No 3 SM facility in Chiba will be shut in late March and will be off line for about a month.

Dohow Chemical plans to shut its 200,000 tonne/year SM unit at Changzhou in China’s eastern Jiangsu province on 10 February for one month of maintenance.

However, the cautious stance adopted by buyers in the spot market this week fuelled concerns that the SM price uptrend might fizzle out in the near term.

“Buyers, especially end-users, are starting to become hesitant and unwilling to commit at these high prices, so a correction might be due,” said a trader in Korea.

SM is a liquid chemical used to make plastic resins such as polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) as well as synthetic rubbers such as styrene-butadiene-rubber (SBR) and styrene-butadiene-latex.